Recently I was researching the histories behind the creations of the RRSP and 401k for a presentation I was preparing for tax specialists in Southern California. It occurred to me how little decisions can make big differences in our end results and how we see and act in our worlds.
In essence, our intent and the structure for realizing it does create our outcomes. Our personal and professional realities first begin with well defined intentions of what we want to experience in our lives. It has been said that if you don’t know what you want, there are plenty of other people who are willing and able to step in and gladly decide for you.
One perfect example of the power of knowing the end in mind is the history behind the creation of the RRSP. In 1957, Canadian Finance Minister Walter Harris introduced the RRSP into legislation as the solution to issues raised by the Canadian Medical Associations, who pleaded for a tax deferral plan for self-employed taxpayers that wanted to save for their retirement. Canadians know the rest of this story. Today close to $1 trillion are held in Canadians’ RRSPs.
Another example with a similarly result is the story behind the American 401k Plan. Ted Benna, a Pennsylvania benefits consultant in 1980 asked the simple question of how could American executives save more tax efficiently for retirement? By knowing what he wanted to find, Benna used his question as his cipher for reading the American tax code. The result was him finding hidden within the code an obscure provision, 401(k). By knowing what he wanted, Benna turned the 401(k) tax provision into an all American solution. Today’s 401k plans have grown into the US’ most popular employer-sponsored tax deferred retirement benefit plan.
We can all benefit by learning the approach that both Harris and Benna mastered for reaching their goals. Both the RRSP and the 401k plan would have never materialized if these two individuals had not know what they wanted to create. By beginning with the end in mind, we are able to articulate and then coordinate where we are and what we have to begin with to determine the best route to reach our desired outcomes. The focus of this month’s column is defining the process that both Harris and Benna applied to arrive at their solutions which can help us become more effective in defining and reaching our best results as tax and financial professionals.
I have always been fascinated with how in the early 1960s the United States mobilized its resources to land a man on the moon and return him safely to Earth within that decade. At the moment President Kennedy announced his dream for his nation to achieve that feat there were well over a million calculations that had yet to be made to turn this vision into a reality. Edward Lindaman the director in charge of planning the Apollo space program at NASA discovered that when people create plans by working backward from their desired future outcome, the result was they took less time to plan. Using this method of planning increased enthusiasm for the plan and developed a more realistic simulation of the challenges that would be faced. This planning technique is credited with the discipline of Project Management.
Project Management is a formalised and structured method of managing change. Project Management focuses on defined future outcomes that all parties involve aim to achieved by allocating resources effectively. These insights can be incorporated into the planning processes we apply when working with clients and ourselves to achieve success and to avoid failure.
First begin with the question of what your goal is and the intent behind it. A question is infinitely more powerful than its answer because it presupposes that there is an answer within the framing of the question. Your success and intelligence are founded on your ability and willingness to frame the right question and to have the fortitude to go down the rabbit hole to wherever it takes you.
Below is a process that has been successfully applied by Project Management professionals since WWII. Next time you sit down to plan try this process on for size.
Step One: Begin with the end in mind. Clarify your intention for doing what you do. To be successful at this step you need to identify goals and objectives, as well as clarify financial, personal values and attitudes. These considerations are important in determining the best planning strategy.
Step Two: Clarify the present situation by collecting and assessing all relevant personal and financial data such as lists of assets and liabilities. In Step Two of this process, one becomes grounded in knowing what he or she has to work with. This creates tension between what one has now and what he or she wants to manifest in their lives in the future. It is this discrepancy that propels you towards what you want to create in both your personal and business life.
Step Three: Work backwards from your desired goal towards your current circumstance to identify what needs to be done to realise your end goal. Problem areas during this step will become clearer. These possible problem areas must be identified before solutions can be found and acted upon so you will reach your desired outcome.
Step Four: Put your intent down in writing and then the path you plan to take, to reach your goal. The length will vary with the complexity of an individual goal. The person who is successful at this process knows if the plan is not written down in a tangible formal document, the plan is not real for in your mind.
Step Five: Take action now. A plan is only helpful when it is put into play. Implementing the right strategy will help you reach your desired goals and objectives. As aTrusted Financial Advisor you will assist clients in the actual execution of their plans, and in coordinating their implementation with other knowledgeable professionals, if necessary.
Step Six: Consistently go back and review your goals and plans. Understand that this process only ends when you are no longer walking this earth. Life is a journey so make the commitment to frequently review your intent and your corresponding plan. The one congruent unifier about life is change. Your situations should be reviewed and reassessed at least once a year to account for changes in life to accommodate what you have learned and current conditions.
When one adopts this process of seeing the end in mind, they are trusting in their own intuitive assessment of reality. They have the same knowing so eloquently put by Napoleon Hill in his landmark book Think and Grow Rich, first published in 1937: “thoughts become things.” They are not seeking social approval, personal advantage or a sense of absolute truth. They are seeking to find opportunities to contribute. The secrete is the more time you spend with this process, the more energy and vitality your end product will have on your own life, those around you, your environment and most importantly on your legacy.
Peter J. Merrick, BA, FMA, CFP, TEP, FCSI is a Trust and Estate Practitioner and President of MerrickWealth.com a fee-for-service financial consulting firm in Toronto and Vice President of Advisorworld.com, a site to guide you through the process of finding a financial advisor . He is the author of two books: “The Essential Individual Pension Plan Handbook” (LexisNexis Canada , 2007) and “The TASK – The Trusted Advisor’s Survival Kit” (LexisNexis Canada , 2009). Peter can be reached at 416.854.1776 or Peter@MerrickWealth.com